Two retail giants have seen their fortunes dramatically diverge. Walmart (WMT 0.12%) shareholders are basking in a record-setting year, with strong growth propelling the stock to a fantastic 81% return thus far in 2024, at the time of writing. In contrast, Target (TGT 3.01%) shareholders have endured a year to forget, with the stock falling 7% year to date.
The winner this past year is clear, but investors may be wondering what lies in store for 2025. Can the fantastic rally in Walmart stock continue, or could a potential comeback from Target kick off a big return for its shares going forward? Let's explore which stock is the better buy right now.
Image source: Getty Images.
The case for Walmart
Walmart is recognized as the world's largest retailer, operating more than 10,500 stores across 19 countries. Even from that juggernaut status, the company continues to post strong operating and earnings momentum at a time when some industry peers, including Target, are citing more challenging macroeconomic conditions.
In this case, Walmart has hardly missed a beat, gaining retail market share in the United States as comparable sales have accelerated over the past year. During the third quarter, ended Oct. 30, global sales rose 5.5% year over year, while adjusted earnings per share (EPS) were up 13%. The gross margin also reached its highest level since 2021.
Walmart is benefiting from robust transaction volumes and higher average ticket pricing in both its U.S. and Sam's Club units. Internationally, the company's e-commerce platform has shown remarkable growth, with sales increasing 27% from last year globally. This digital expansion not only drives growth, but also strengthens customer engagement through comprehensive omnichannel services, including home delivery and in-store pickup options.
Looking ahead, management projects full-year adjusted EPS between $2.42 and $2.47, representing a 10% increase at the midpoint from 2024.
In the stock market, it's often a smart idea to stick with the trend and let winners run. Walmart is well-positioned to keep generating positive shareholder returns, which is a great reason to buy the stock today.
The case for Target
Target has a smaller footprint compared to Walmart, focusing only on the U.S. market, with a still-formidable network of approximately 2,000 stores. The company stands out through its more curated shopping experience that tends to include trendier and more premium brands, historically catering to a younger demographic.
Recent results have disappointed amid what management calls a volatile operating environment, with customers reducing discretionary spending. Third-quarter results (ended Nov. 2) showed modest 1% sales growth, while EPS declined 12% year over year, primarily due to margin pressure from rising costs.
While headline numbers have fallen short, Target maintains profitability and overall strong fundamentals, with expectations of a growth rebound in the coming year. In an environment where macroeconomic conditions stay resilient, Target could benefit from recent interest rate cuts by the Federal Reserve, potentially boosting consumer spending.
According to Wall Street analyst consensus, from an estimated 1.4% revenue decline this year, Target is seen getting back on track with a 2.8% growth rate in 2025. Similarly, earnings per share is forecast to climb by 7% in 2025 to $9.29 as its operating environment improves.
| Metric | 2024 Estimate | 2025 Estimate |
| Revenue (in billions) | $105.9 | $108.8 |
| Revenue change (YOY) | -1.4% | 2.8% |
| Earnings per share (EPS) | $8.67 | $9.28 |
| EPS change (YOY) | -3% | 7% |
Data source: Yahoo! Finance. YOY = year over year.
The main attraction of Target stock is its compelling valuation, particularly next to Walmart. Shares of Target are trading at just 15 times its consensus 2024 EPS as a forward earnings per share (P/E) ratio. This level represents a bargain next to Walmart at a forward P/E of 38. Additionally, Target's 3.4% dividend yield makes it a more attractive income investment compared to Walmart's 0.9% yield.
Investors who are confident in the company's ability to get back on track could consider buying shares ahead of that possible growth turnaround.
TGT PE Ratio (Forward) data by YCharts
Decision time: Target offers better value
It's the classic growth-vs.-value matchup as we compare shares of Walmart with Target within the consumer goods sector right now.
While holding a bullish view on both stocks, I believe Target is the better buy, with more room to outperform in 2025 from its lower baseline of expectations. Walmart has been very strong, but its pricey valuation may limit the stock's upside going forward. For Target, stronger-than-expected results in the next few quarters could be a catalyst for the stock to rally higher.
